Tuesday, October 20, 2009

Morning Briefing for October 20th: Trying to Sustain Highs

Above we see a multiday view of the ES futures. Note how we took out the October 15/16 highs on Monday, fell back, but now are trading above those. That frames the big issue for this morning's trade: will we see a continuation of the upmove into the 1100 area, or will we fall back into the multiday trading range? Thus far, investors have been responding positively to favorable earnings news--itself a useful sentiment gauge.

To this point, I have seen little deterioration in the Technical Strength (short-term trend status) of the 40 stocks in my basket, with 31 in uptrends, 5 neutral, and only 4 in downtrends. (The trend measure is updated daily before each market open via Twitter; follow tweets here). We did see some stalling out of new 20-day highs on Monday; advance/decline strength was good, but tailed off somewhat during the day. I'll be watching closely today to see if we can expand the breadth of this rally on the heels of recent good earnings news.